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Guest Op-Ed: When it Comes to Regulation, Focus on the Endzone, Not the Yard Markers

Suppose you injure your shoulder. You can choose between two specialists of equal training and skill, at two different hospitals.

At one hospital, your doctor will be free to recommend and perform whatever treatments deemed best for repairing your shoulder, including new techniques and medicines being developed there. If your shoulder is successfully repaired, the hospital gets an award.

At the other hospital, the doctor will be required to execute – to the letter – the standard treatment steps for shoulder repair prescribed by a government regulator. The prescribed method was developed decades ago, and was considered the best practice at the time, but has never been updated. As long as the doctor follows the required steps, the hospital avoids a penalty, regardless of whether your shoulder actually improves.

Which would you choose?

There are many ways to reach a desired outcome. How you get there can vary. Prescribing narrow means instead of the desired end can be very limiting. At times, it can slow, or defeat entirely, success.

Federal regulators traditionally have skewed towards prescriptive policies, instead of clearly defining the problem and the desired result. This increases compliance costs while chilling innovation and investment in new technologies. It also elevates the judgment of the government regulator over the combined experience and expertise of an entire industry. And if the regulator decrees the wrong solution, the desired result will not be obtained.

The phenomenon ensnares portions of the transportation sector, where good intentions by the government to improve safety can sometimes miss the mark by focusing too much on defining the yard markers (i.e., inspections, technology types) instead of the goal line.

Within the context of bipartisan regulatory reform, the freight rail industry believes policymakers should embrace non-prescriptive regulatory tools, like performance-based regulations, where appropriate. “A performance-based regulation sets performance goals and allows individuals and firms to decide how to meet them,” say researchers at the Kennedy School of Government at Harvard. A shift towards this framework will foster and facilitate technological advancement and achieve well-defined policy goals.

Steven Kelman, a former administrator of the Office of Management and Budget’s Office of Federal Procurement Policy, said in a 2001 op-ed, “improvements resulting from performance management also would boost citizen confidence in government.”

Last year the Federal Railroad Administration (FRA) proposed a measure that would require railroads to run every train with at least a two-person crew unless special permission is granted based on unspecified criteria. When issuing the rule, the FRA acknowledged that it lacked any data to support the assertion that two-person crews are safest. In fact, the FRA noted that “it is possible that one-person crews have contributed to the improving safety record” of the rail industry.

Here is a shining example of how government seeks to address a problem, in this case accidents caused by human error, by dictating to the railroads a specific approach: use of two-person crews. And it does so without any data or analysis to support the notion that the second person in the cab will actually result in a reduction in human-error accidents – which was, after all, the goal.

What incentive do freight railroads have to develop and test technologies that could increasingly automate train operations – eliminating human errors and increasing efficiency – if the government is mandating two employees in the cab regardless of whether there is a need for them? This is a regulatory philosophy antithetical to technological advances.

Likewise, some in government are pushing to mandate the use of electronically controlled pneumatic (ECP) brakes, again with the goal of improving safety by reducing derailments. But research and years of data from real-world testing show ECP brakes are unreliable and have a minimal safety impact over conventional braking systems currently in place. The regulator is requiring a technology that the railroads have tried and found unreliable and ineffective for reducing accidents. ECP brakes are not the answer to improving safety, but if they are required anyway, what incentive will the railroads have to develop newer, more effective braking technologies that actually will reduce derailments?

Today, industry must comply with FRA safety regulations that cost roughly $1.5 billion a year in paperwork alone, according to government data. That doesn’t include time for paperwork mandated by myriad other agencies, nor does it include compliance costs beyond paperwork and the impact of the regulations, which can distort the marketplace and disrupt incentives and ability to invest in infrastructure to meet future demand.

Contrast that to the light touch exerted to date by policymakers regarding intelligent vehicles, which most observers predict will be widely operational in the near future. Rather than apply uniform rules to a diverse industry, the National Highway Traffic Safety Administration issued a framework of principles to consider. The potential for smarter vehicles has only grown since then, as industry is free to experiment.

Freight railroads recognize the need for oversight, and the role of regulators in instilling public confidence. Yet we also believe the world today is much different than it was at the dawn of safety regulation, and forward-leaning innovation will only accelerate greater change. Such a dynamic environment requires a nimble and flexible regulatory structure. And the reality is that if all the many decades’ worth of prescriptions – inspections, tests, certifications, paperwork and the like – that currently saddle our industry disappeared tomorrow, the railroads would continue to operate as safely as they do today, continuing their relentless drive towards zero accidents and zero injuries. Operating a safe railroad is good business.

Enhanced waiver and pilot program processes are small changes that would allow effective demonstrations of alternative approaches. More broadly, new leadership at the U.S. Department of Transportation should, to the extent possible, specify performance objectives in its regulations and guidance documents, rather than mandate specific approaches that regulated entities must adopt.

This is good government and an approach worth considering.

Hamberger is President and CEO of the Association of American Railroads. The views expressed above are those of the author and do not necessarily reflect those of the Eno Center for Transportation.

This is a letter marked "CONFIDENTIAL" from Treasury Secretary Ogden L. Mills to Acting House Ways and Means chairman Charles L. Crisp dated February 16, 1932 recommending that Congress enact a new excise tax on gasoline to help eliminate the projected federal deficit.

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